Air India to get $1 bn for aircraft funding

Mumbai: Cash-strapped Indian carriers are finally finding money to finance expansion plans or merely fund operations. State-owned Air India is set to receive a $1 billion (Rs 4,900 crore) loan and Naresh Goyal-promoted Jet Airways is close to striking a deal for a Rs 500-crore loan from Indian Overseas Bank (IOB).
Flag carrier Air India is raising funds to buy 23 new aircraft and is in discussions with a consortium of UK-based Barclays and promotional bank for German and European countries KFW, and with Deutsche Bank. The deal is expected to be finalised in a week.
The loan, however, will have a sovereign guarantee, which is expected to help the airline access finer rates. Dollar denominated loans to companies are currently pegged at the London-Interbank offered rate (Libor) plus 1,000 basis points (10 percentage points). With a government guarantee, the rate could drop to Libor plus 450 or 500 basis points.
Air India is buying 23 Airbus A319s/320s, for which orders have already been placed with the European aircraft manufacturer. Sources in Air India confirmed the development.
Apart from the loan from IOB, Jet is also believed to have secured another funding of Rs 1,000 crore from the Abu Dhabi government investment firm Mubadala Development Company. Jet could not be reached for confirmation. IOB officials declined to comment on the deal.
18/11/08 Manisha Singhal/Business Standard

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Categories: Indian Aviation- In General Nov 2008